14 - 38. As part of your first audit of the financial statements of Marina del R

Question

14 - 38. As part of your first audit of the financial statements of Marina del Rey, Inc., you have decided to confirm some of the accounts payable. You are now in the process of selecting the individual companies to whom you will send accounts payable confirmation requests. Among the accounts payable you are considering are the following: a. Which two of the above four accounts payable would you select as the most important to confirm? Explain your choice in terms of the audit objectives in sending accounts payable confirmation requests. b. Assume that you are selecting accounts receivable to be confirmed. Assume also that the four companies listed above are customers of your client rather than suppliers and that the dollar amounts are accounts receivable balances and total sales for the year. Which two companies would you select as the most important to confirm? Explain your choice. 14 - 38. As part of your first audit of the financial statements of Marina del Rey, Inc., you have decided to confirm some of the accounts payable. You are now in the process of selecting the individual companies to whom you will send accounts payable confirmation requests. Among the accounts payable you are considering are the following: a. Which two of the above four accounts payable would you select as the most important to confirm? Explain your choice in terms of the audit objectives in sending accounts payable confirmation requests. b. Assume that you are selecting accounts receivable to be confirmed. Assume also that the four companies listed above are customers of your client rather than suppliers and that the dollar amounts are accounts receivable balances and total sales for the year. Which two companies would you select as the most important to confirm? Explain your choice.

Explanation / Answer

a) The 1st company Dayco we should avoid because we no need to confirm as there is not amount payable by year end. Then we shoud confirm London Co and Gearbox inc. because as per credit term agreed large amont from the total outstanding is due in current year to avoid any legal issue.

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